There is a long felt need for affordable flight accident insurance to cover the risk of accidental death, injury, and/or dismemberment caused by an airline accident, such as a crash. Passengers need to be covered while boarding an aircraft, traveling on said aircraft, and deplaning from said aircraft.
As currently offered, however, flight accident insurance is very costly. Typical premiums for a one way flight are $50 per flight for $1,000,000 coverage. Additionally, many insurance carriers limit their exposure to $10,000,000 per incident for all insureds. If a flight had 20 insureds on board and all 20 perished in an accident, their beneficiaries would only get $500,000 each ($10,000,000/20) instead of the full $1,000,000 of coverage listed on the policy. In an extreme case where a full jumbo jet had 300 insureds on board, their beneficiaries would only receive $3,333 each ($10,000,000/300).
The primary reason for insurance companies limiting their total exposure per flight is the cost of reinsuring the “catastrophic risk” associated with the very rare event of a flight crashing with a large number of insureds on board. If there were roughly 10 million flights per year and roughly 10 million flight accident insurance policies sold, then the average number of insured persons on any given flight would be 1. If these persons were randomly distributed, then some flights might have 2 or 3 insureds and some wouldn't have any. The probability of any flight having 10, 20 or more insureds would be exceptionally small.
Insured persons, however, are not distributed randomly. A family, sports team, or other group of people may purchase flight accident insurance as a group. Hence some flights might have exceptionally large numbers of insureds on board. If one of these flights were to crash, then the insurance company's exposure would be very large. Hence insurance companies must limit their exposure and charge a very large premium to cover the catastrophic risk of a flight with a large number of insureds on board crashing.
Limiting coverage to a fixed amount for all insureds on board, however, is misleading to the individual insureds that buy coverage. Each one thinks that he or she is purchasing $1,000,000 in coverage, but in fact, that coverage may be dramatically less if a large number of fellow passengers are similarly insured and there is no way for an insured to know how many others on board are insured. Hence there is a long felt need for low cost flight accident insurance with a benefit that insureds and their beneficiaries can count on irrespective of how many other insureds are on board.